per month. Exercise #12A: You want to retire in 35 years. To fund the retirement
ID: 2808882 • Letter: P
Question
per month. Exercise #12A: You want to retire in 35 years. To fund the retirement, you deposit $25,000 into an account now, and you deposit $20,000 five years from now. You also plan to save an equal amount each year between now and 35 years from now. Once you retire, you want to withdraw $85,000 at the end of each year for 25 years. r-696. How much money must be in your account at the time of retirement to cover your retirement needs? You will need $. You need to save at the end of each year for the next 35 years per year. in the account in 35 years to cover your needs.Explanation / Answer
Using financial calculator
PV = $ 1086,585.27
This can also be computed using PV of annuity formula as 85000*(1-1/1.06^25)/ 0.06
So you will need $ 1086,585.27 in the account in 35 years
FV of $25000 deposited now = PV*(1+r)^n
= 25000*1.06^35
= $192,152.17
FV of $20,000 deposited after 5 years = 20000*1.06^30 = $114869.82
Balance to be obtained from regular saving = Total FV - 192152.17 - 114869.82
= 1086,585.27- 192152.17 - 114869.82 = $779563.28
Using financial calculator
FV = 779563.28
N= 35
I/Y = 6%
PMT = $6995.69
You need to save $ 6995.69 at the end of each year for next 35 years
Amount needed on retirement N 25 years Withdrawals (PMT) 85000 per year Rate (I/Y) 6%Related Questions
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